@Leigh: Congrats on moving to your first debt-free Christmas! That’s awesome. Exactly the type of thing I’m talking about. Instead of saving up a big lump of money and saying, “Well a portion is for Christmas and a portion is for car maintenance…” … this makes it so much easier to differentiate what is where. Helps you identify the gaps better.

@Jason: (For your first comment): See the above comments! It helps you easily identify where your gaps are and keeps you on pace each month for saving up for the expenses. I suppose you risk “over saving” but I’d rather do that than the other.

(For your second comment): True, but that’s why I keep a home maintenance fund. I’ve read you need to have 1-2% of the value of your home set aside for maintenance — water heater explodes, dish washer goes out, etc. Sure you might have two huge expenses land at the same time, but as with the other examples this is the first line of defense.

@Kreestee: Good luck with the car issue. We don’t do the exact same thing in terms of commissioned sales, but similar: we budget off of the lowest I think I would make (as in making any less would likely jeopardize my future with the company) and the rest goes straight into our saving plan (assuming there is more at the end of the month!).

@Ashley: Exactly. You are much less likely to dip into an individual fund than a general fund. Thanks for stopping by!

I will try my darnedest not to break it, but once I do it’s all gone in the matter of a day. Personally, having specific sub-accounts/envelopes for each area creates a mental barrier in my mind to only spend what is in that one sub-account.

Of course if a car repair is $600 and I only have $500 saved in my car repair fund I will still need to get my car fixed. However, I would be more inclined to check out pricing at different locations or see if there was a way to get a discount than if I had one account with $3,000 to use at my discretion.

Or a Car if you need to buy a new car you will only spend what you have in that sub account, however if it is going to cost you $500 to fix your car it really doesn’t matter much what is in the car fund.

I suppose I can see the benefits in those cases.

We do the same thing – cars (repair / registration / tickets – hopefully none of those), insurance, Christmas, etc. We have a car without air conditioning right now; thank goodness it’s the coolest summer on record here in Central Ohio or I’d have to raid my car fund to get it fixed. Maybe next summer it will be more of an issue, but I’m saving up for it now.

Since I’m in commissioned sales I also have a ’sludge fund’ set aside for those few weeks I don’t hit my average sales. That allows us to stick to our budget, keep paying off the debt at the same rate, and not have to drastically cut everything while panicking til the next paycheck.

It’s also easy to see how much you have avaialble for that purpose – so that your car money, for example, doesn’t pay for Christmas gifts.

I tried the single-account approach before and it simply became a mess. I didn’t know what was allocated for what and how much to contribute. I just had a “blob” of money sitting there. It’s hard to keep motivated that way with specific goals.

Now I still have a single account, but it’s separated into “envelopes” similar to ING sub-accounts.

Different strokes for different folks, I guess…do whatever works for you.

Christmas (will have my first debt free one ever)
car insurance/repairs
car replacement
house maintenance/repairs
travel

We’ve also encountered exactly what you described, where the fund was not quite adequate, but it took care of most of the bill, so we were able to find the rest of the money elsewhere. It made dealing with the emergency a piece of cake.